What Would You Estimate as the Cost of Equity If

question 73

Multiple Choice

What would you estimate as the cost of equity if a stock sells for $40,pays a $4.25 dividend,and is expected to grow at a constant rate of 5%?

• A) 17.46%
• B) 14.52%
• C) 12.69%
• D) 15.63%

---

Definitions:

Efficient

The optimal allocation of resources to maximize the production of goods and services without wasting those resources.

Production Possibilities Frontier

A curve that shows the maximum efficient production level of one good for a given level of production for another, assuming fixed resources and technology.

Slope

In mathematics and economics, slope refers to the steepness, gradient, or inclination of a line, indicating the rate of change between two variables.

Production Possibilities Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.).